Thursday, September 24, 2009

Mr. hedge fund goes to Washington

BusinessWeek observes that hedge funds are increasingly turning to think tanks, political analysts and lobbying firms to gauge how political forces and legislation might affect the private sector. Particularly for sectors like insurance, health care, and energy, what transpires in Washington will affect those companies' financial fortunes.

While this is not "big news," it does demonstrate the extent to which politics have become entwined with the economy. Bringing expert political analysis into the investment decision-making process seems only sensible. It is part of developing a mature outside-in perspective that any enterprise needs to thrive.

With new perspective on political risk, hedge funds might be able to develop keen insight into the winners and losers in regulated sectors. Taking that assumption a step further, hedge funds might become more vocal on policy issues.

For hedge funds that see business value in shaping the debate in Washington, media will become an important tool and they will find that the media will listen. Independent voices in the private sector are too few and far between these days and the media will welcome institutional investors' view on policy matters.

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